Bankruptcy is a legal proceeding that involves a person or business that is unable to pay their outstanding debts. Bankruptcy will typically start by the debtor filing a petition. All of the debtor’s assets are measured and evaluated. These assets can be used to repay a portion of the outstanding debt. The goal of filing for bankruptcy is to have a “fresh start” with your debt and to relieve stress.
Filing for bankruptcy is a big decision to make. If you have large debts that you can’t repay, are behind on your mortgage payments and are in danger of foreclosure or are being harassed by creditors then bankruptcy may be the solution for you. Bankruptcy can reduce or eliminate debts and save your home. It does have some consequences that you need to be prepared for though. Filing bankruptcy can hurt your credit score and make it harder to borrow loans in the future.
When you file for Chapter 7 bankruptcy, the court will put an automatic stay on your current debts. This will be temporary, but will stop creditors from collecting payments, garnishing your wages or foreclosing on your home. The court will then take a legal possession of your property and will appoint a trustee to your case. The bankruptcy trustee will then review your finances and assets and will be responsible for selling certain property that your bankruptcy will not let you keep. They will use these funds to pay your creditors. At the end of this entire process, the court will discharge your remaining debt.
Chapter 11 bankruptcies are exclusive to businesses. Businesses will typically turn to Chapter 11 bankruptcy when they are in a pinch financially. This form of bankruptcy helps the business keep their doors open long enough to regroup and come up with a new game plan for the business. Chapter 11 bankruptcy is similar to Chapter 13 in the way of a repayment plan is then established between the business and it’s creditors.
The goal of Chapter 13 bankruptcy is to help people by putting them on a repayment plan that makes it easier to pay back what they owe in debt. A Chapter 13 bankruptcy requires a repayment period of 3 to 5 years and once you have completed your repayment plan, then all your remaining debt will be wiped out. Chapter 13 repayment plans limit your monthly payments to no more than 15% of your disposable income. This is the income you have left over after paying your essential living expenses.
Business bankruptcies still fall under the above mentioned bankruptcy types. A business can file for Chapter 7, 11 or 13 bankruptcy depending on how their company is formed in the eyes of the law. Sole proprietorships can file Chapter 7 and Chapter 13 bankruptcy, while corporations have to decide between Chapter 7 and Chapter 11 bankruptcy.
At Daniel Taylor Law, P.C., we believe bankruptcies can have a winning strategy. No two businesses are the same nor should they be treated that way. We focus on understanding your unique scenario so that we can put you in the best position possible after this process. We want to make sure we protect your assets and put you in a good position afterwards. Fill out the contact form below to get your FREE one hour strategy call.